Former Howard-era union-buster
Peter Reith
and union leader
Paul Howes
have joined forces to accuse the Victorian government of putting jobs and living standards at risk because of a reluctance to take on ­opponents of onshore gas, and lift a ban on the industry.

“We are very concerned that politicians from both sides of state politics are yet to take the necessary action to protect jobs and cushion families and pensioners from rising gas prices. Many steps are needed but the first and most vital is greater gas production," the trio write.

The bold step reflects ­frustration on the part of Mr Reith – who was asked by Premier
Denis ­Napthine
to report on the onshore gas industry – at the government’s stonewalling.

On Thursday, Mr Napthine slapped down Mr Reith – who calls for the onshore gas industry to be opened up as soon as possible to provide alternatives to Bass Strait – on the urgency of acting to avert the looming gas crisis.

“I think I have a different approach to Peter Reith on that," Mr Napthine said.

He said Victoria had “extensive" energy resources available, from brown coal and Bass Strait gas to wind and hydro power.

“The onshore gas, what reserves there are there have been there for thousands of years and I’m sure they’re going to be there for the next two to five to 10 years,“ Mr Napthine said.

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His government has a tenuous grip on power and goes to the polls next November.

Development blocked

But Mr Reith and his co-authors write that gas in the ground in Victoria and NSW, which has a virtual ban, “can’t help with supply or price spikes if it stays there".

“Yet governments and oppositions are so worried about a community backlash they are blocking most development. If this keeps up, we will all pay a price, and soon. The changing gas market is going to have a huge impact. But if Victoria and New South Wales don’t get going on gas, the cost will be even higher. To preserve existing jobs and generate more, we need action."

Mr Napthine, whose South-West Coast seat is over the Otway Basin, took a more cautious stance than Energy Minister
Nicholas Kotsiras
, saying the government would “hasten slowly".

Mr Kotsiras departed from prepared text at a Melbourne mining dinner on Wednesday to express confidence the government could find a balance between gas producers and opponents.

He believed the community would accept the government’s decision “once we have discussed, analysed and done our research", and said he would hold a “roadshow" to explain the decision; a sign he favours a green light.

Mr Reith endorsed “fracking" – a way of releasing gas from “tight" rock deposits, which is banned in Victoria –- in an interview with The Australian Financial Review on Wednesday.

He said there was no reason why Victoria could not reclaim its predominant position in manufacturing “subject to it being prepared to take the necessary actions to particularly help with cheaper energy prices".

Mr Reith said access to gas was the “big issue facing the Victorian ­government today".

“In my view, we should be doing everything we can to make the most of our opportunities," he said.

He challenged the state government to follow the industry-building example of past Victorian statesmen, such as John Monash and Henry Bolte, and stand up to green claims about hydraulic fracturing or “fracking".

“It does seem quite extreme to suggest that fracking is some monstrosity for the Victorian environment when all the evidence is that it’s merely a new technology which has provided great benefits for the people of the United States who have been prepared to use it, with a huge shot in the arm for their manufacturing as well."

Louisiana over Newcastle

He cited the example of fertiliser company
Incitec Pivot
choosing to build a $1 billion ammonia plant in Louisiana instead of Newcastle because of the abundance of cheap natural gas feedstocks from shale gas.

Mr Reith said there were good prospects for onshore gas in Victoria, which would provide an alternative source of supply to Bass Strait.

“In my view, we should be doing everything we can to make the most of our opportunities," he said.

Victorians “should not kid themselves" about manufacturing in their state, which is under intense pressure from rising costs.

“Unless people are prepared to really grapple with the issues, I am afraid manufacturing’s future is not great in Victoria," Mr Reith said.

“It’s just a reality and people should not assume otherwise."

Victoria has more than 20 years supply worth of gas reserves in Bass Strait, plus an unquantified amount in the unexplored onshore coal seam and "tight rocks" gas reserves in Gippsland and the Otways.

Damian Toohey, general manager, strategy and finance, at Chinese-owned Qenos, said: “A lot of manufacturers on the east coast, in particular, have been used to $3 to $4 gas and to have it significantly increase is putting enormous pressure on manufacturing investment and jobs."

Qenos, Australia’s major supplier of polyethylene, invested $195 million expanding its Altona plant after securing a long-term supply of ethane – a natural gas by-product from Bass Strait – from ExxonMobil and BHP Billiton.

It converts ethane into ethylene and then polyethylene – or plastic – and sells it to hundreds of other manufacturers to be converted into plastic piping, milk bottles and flexible packaging.

A goal of the Reith report, Mr Toohey says, should be to get “new supply on line as quickly as possible".

In the meantime, governments need to make sure “there are no unintended consequences, and if transitional support is required then to avoid those unintended consequences, short-term support is something that should be considered".